American governors have specific means – veto and agenda-setting powers – for shaping public budgets. Governors face competing managerial and political pressures when constructing a budget: forces of legislatures, agencies, and parties that demand changes in individual categories contending with the need to deliver the budget as a whole. In addition to managing these competing interests, governors also have their own preferences they wish to express in the budget. This chapter shows how the institutional strength of governors affects their ability to reign in competing demands. Our quantitative analysis shows that governors with stronger powers can make large cuts and raises in budgets even larger: a finding we term “bottoming-out” and “topping-off.” This mechanism has significant consequences for the budget as a whole: Disruptions in spending lead to slower long-term budget growth overall. Hence, executive power leads to less stable policymaking, particularly in instable interest group environments.

In this chapter, we first summarize literature in public policy process theory, political institutions, state politics, and interest groups. We leverage this scholarship to offer a detailed argument about state budgeting that proceeds in three steps. The first step is about how policy issues provide motives for action. The second step is about how the formation of interest groups around issues makes those issues more or less amenable to policy change. The third step is about how the institutional strength of the executive – in this case, a governor – provides the means to change policy given the interest group context surrounding issues. Our claim is that issues provide the motives, interest groups provide the opportunities, but the extent to which governors act on those opportunities depends on their means.